Learn Crypto

How to DYOR : 4 things To look out for

Jesse
4 mn

Before you invest in any crypto projects or assets, the golden rule is to always do your own research (DYOR). Hearing about a new coin from your neighbor or cousin's friend on Facebook is great, but it still requires a sizable chunk of your own research. Before you part ways with your money in the crypto space ensure that you've weighed up both the risks and the potential, the responsibility lies with you.

Crypto investing has a track record of being volatile, so the more clued up you are on the crypto assets you invest in, the better. While market data and fundamental analysis are important, be sure to understand the basics of a project and the project's potential.

What is DYOR (do your own research) in the crypto space?

The holy grail of investing in crypto projects, DYOR has become a common abbreviation for do your own research. The phrase is used to remind crypto investors that they should conduct their own research on a crypto project thoroughly before investing any money in it.

Whether you're looking to buy crypto assets, tokens, NFTs, or in any way get involved with a crypto project, be sure to thoroughly investigate the following factors mentioned below when doing your own research. Don't be lured in by a project's fundamental analysis, ensure that you understand everything there is to know about the project. Crypto investing can have devastating consequences for uninformed investors.

The 4 dimensions of how to DYOR on a crypto project

Below we will outline the four main dimensions of conducting your own research on a new cryptocurrency. These four pillars will give crypto traders a solid understanding of what the project represents, how it's been received, and what might happen in the future. Be sure to do this before looking at any technical analysis.

Remember, doing your own research requires reading multiple sources and verifying that the information is correct. When conducting your own research you mind find some disputing information, continue looking until you have the accurate answer.

Team

First and foremost, who is the team running this project? This information is typically presented on the platform's website or in its whitepaper (it's imperative that a project has both of these).

Take a look at the size of the project team, a small team might fall apart if one of the three members leaves while an excessively large team might be a red flag if it is still in its early days.

Check the experience of the leaders on the team. Ideally, you want leaders and executives to have experience in blockchain, Web3, finance, business, computer science, or any other related fields. Also, consider whether their current titles match their experience.

Are the team entirely anonymous? This is considered a red flag as the potential for them to execute an exit run is high. Consider the leaders of the project carefully and decide whether they have the means to steer this ship in the right direction.

Tokenomics

Tokenomics refers to the factors related to the supply and demand of a coin or token. The term merges "token" and "economics" and provides a key area of study for potential investors when establishing a coin's long-term viability. Below are the main aspects of tokenomics:

  • Token supply: what is the maximum supply of coins or tokens?
  • Token utility: what is the purpose of the coin (does it have governance rights, does it serve a specific function)?
  • Market cap: How does the coin's market cap compare to that of its competitors?
  • Issuance tactics: does the project intend on conducting token burns or any related activities?
  • Minting, allocation, and distribution: how are the coins minted (all at once, gradually), when launched how are the tokens distributed, do a small number of members hold a large amount, are any coins locked up that will be released to the market on a specific date?
  • Trading volumes and liquidity: what kind of volumes does this coin trade and how much liquidity does it have?

Innovation

For this pillar of the project, you want to look at what problem this project is solving, and what edge it has over its competitors. It's also worth taking a look at the project's road map and whether it is delivering on its self-set milestones. No roadmap is a red flag, well-managed projects are transparent and eager to release their milestone accomplishments.

Ideally, you want to establish what solution this project is bringing to the greater industry and what competitive advantage this project holds over similar projects. Consider its weaknesses.

If you want to take things one step further, consider what the team might not be telling you, and what elements could work against the growth and success of the project.

Social

This might not seem essential, but social media platforms can offer significant insights into the project's community, achievements, and current state within the crypto space.

When conducting your crypto research check whether the project has active official social media channels, and how often these are updated.

Secondly, how big is their community both in terms of followers and engagement? Are people engaging with the platform or talking about it on their own channels? Community members can shed a big light on how the project has been received.

Lastly, what kind of discussions are being had within the community of these groups? Are people friendly and inviting, or are they blindly promoting the project and pushing "lambo" sentiments? Ideally, you want to have a space where open and honest discussions can be had and constructive criticism accepted.

Toxic communities along with shillers and abandoned channels are all red flags.

The bottom line for DYOR and crypto projects

Establishing these four dimensions of a project is important prior to investing any money. Not only does it give you the opportunity to learn about a new project, but also to become better acquainted with what is happening in the crypto space.

Through the process of conducting your own research, you might discover a viable gem or even gain access to exclusive airdrops as an early supporter. Bear markets are a great time for diving into DYOR explorations.